Health Savings Accounts: Your HSA Trustee

Note for Employers: Health Savings Accounts (HSAs) are becoming a more common part of average Americans’ lives. Paired with HSA-qualified health plans, they cover a growing number of Americans’ health care costs and play an important role in their future.

This post is one of several in a series to help your employees understand HSAs better and use them strategically. The posts are excerpts from “HSA Owner’s Manual, Second Edition” by Todd Berkley (published by Tate Publishing, 2015). Todd Berkley is Senior Vice President and Managing Director for BenefitWallet®

HSAs are offered by trustees or custodians.

Your HSA trust agreement cannot limit your reimbursements to eligible expenses. The IRS law gives you the freedom to make withdrawals for any expense (subject to income taxes and penalties if the expenses are not HSA-eligible) and no one can restrict your freedom.

Your trustee must provide at least one way for you to make distributions (withdrawals) for non-eligible expenses. A trustee typically will offer an unrestricted debit card (accepted at all merchant locations) and at least one other method of distribution – checkbook access, a trustee check to you, or online bill pay through the HSA website.

“Ultimately, you are responsible for knowing the rules and limiting your HSA contributions according to your situation.” Todd Berkley, Senior Vice president and Managing Direector, BenefitWallet

Your trustee can place certain restrictions on distributions. They can, for example, not allow cash withdrawals with your HSA debit card, not allow a reimbursement under $10 or limit the number of checks you write or debit card transactions in a given month. Some trustees will limit you to certain types of merchants for debit card use, or even issue a card that works only in IRS-approved stores for medical reimbursements. The terms are spelled out in your agreement with the HSA trustee. If you don’t like the terms, you can change trustees at any time.

Your HSA trustee does not track your deposits to ensure that you don’t exceed your maximum annual contribution. Your trustee typically sets an annual contribution limit equal to the statutory annual maximum contribution for a family contract plus an additional $1,000 “catch-up” contribution if you’re 55 or older. But because the trustee can’t know whether you’re covered by a self-only contract, or if you are eligible during all 12 months of othe year, the trustee can’t set its system to limit your contribution. Some have self-service tools to help you keep track of your own limits, but ultimately you are responsible for knowing the rules and limiting your contributions according to your situation.

Your trustee does not have to accept a rollover or trustee-to-trustee transfer from another HSA or an Archer MSA. They typically have well-established processes in place to accept such inflows of assets, though the law does not require them to do so.

Your trustee must surrender balances if you want to move funds from that trustee via a rollover or trustee-to-trustee transfer. They do not have an option. They typically charge an account closure fee (generally $20 or $25), especially when you’re asking them to do work to transfer your money to another trustee.

Your turn: Are your employees struggling to understand HSAs? Use the comment box below to send us your questions.

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